When does COLA 2022 take effect for Social Security Benefits?
The Social Security Administration announced a historic 5.9 percent 2022 cost-of-living-adjustment but the increase to benefits won’t be seen right away.
Inflation in the US has been rampant as the nation recovers from the damage wrought by the covid-19 pandemic, taking a bite out of household finances. None more so than those who live on a fixed income, but fortunately relief will be coming in a couple of months.
Every year the Social Security Administration makes an adjustment to what beneficiaries will receive using the US Bureau of Labor Statistics data on inflation. On Wednesday the agency announced a historic rise in benefits to keep seniors and disabled recipients from losing purchasing power.
When will the hike to Social Security benefits take effect?
The boost to benefits will affect around 70 million Americans that receive Social Security and Supplemental Security Income (SSI). Starting 30 December 2022, about 8 million SSI recipients will see their first payments based on the COLA 2022. The new federal payment standard for SSI monthly checks will be $841 for individuals and $1,261 for couples, an increase of $47 and $70 respectively.
More than 64 million Social Security beneficiaries will see their higher payments starting in January based on the Social Security Administration’s payment schedule. The estimated average for a retired worker will be $92 more beginning with their January payment, bringing the new average up to $1,657. The maximum monthly payment for those who reach full retirement age in 2022 will be $3,345.
How was the price increase calculated?
The increase in the annual COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but the Social Security Administration only uses the third quarter of each year to calculate the COLA. Comparing the year-on-year change of the three months in the third quarter, July, August and September, the agency formulates how much benefits will be increased for the next year. The agency rounds to the nearest tenth of a percent.
Why was the COLA so high for 2022?
The COLA for 2022 just surpassed the 2008 increase of 5.8 percent to give Social Security benefits their largest hike in 40 years. In 1982 the recipients saw a 7.4 percent bump in their monthly entitlement. Back in the late 1970s and into the 1980s high inflation was the norm, but over the decades it has been tamed.
The covid-19 pandemic disrupted global supply chains and paralysed production of many materials that go into the manufacturing of in-demand items nowadays that are scarce. These shortages across the board have been driving up prices on just about everything as factories ramp up production again while consumers chase after limited supplies.
The Biden administration is trying to use the power of the federal government to get the flow of goods moving smoothly again to help stem the rising costs that the bottlenecks and backlogs are creating. However, the Federal Reserve expects inflation to remain unusually high through the end of the year but then cooling off in 2022. Although Social Security beneficiaries will see a historic rise in what they receive each month next year, there are worries that it still won’t be enough to cover the pocketbook pain they are feeling now.